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2025 (1) TMI 1215

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..... Impugned Order. Section 7 application was admitted on forged documents filed by the Respondent No. 1 - HELD THAT:- The Section 7 application was admitted on forged documents filed by the Respondent No. 1 and the conduct of the Resolution Professional is not good as it accepted the claims of the Financial Creditor without verification. Additional documents of ledger accounts of SVC Bank were introduced to harm the Corporate Debtor - HELD THAT:- These documents were part of the judicial record and necessary for determining the validity of the Section 7 application. There are no merit in the Appellant's objections to the introduction of these documents. Alleged manipulation of record by Financial Creditor - HELD THAT:- No concrete evidenced has been reproduced by the Appellant to establish the said allegations. It is already noted that the documents produced by the SVC Bank clearly stipulate responsibilities of the Corporate Debtor as co-borrower and Corporate Guarantor. There are no merit in the submissions made on this account by the Appellant. Conclusion - i) The CoC's decision to liquidate, supported by 100% voting, was in compliance with Section 33(2) of the Code, wh .....

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..... of Rs. 2037.87 Lakhs and an Overdraft limit of Rs. 423.29 Lakhs in favour of Principal Borrower UTWC, wherein the Corporate Debtor was alleged to be a co-borrower and corporate guarantor for UTWC. 5. The Appellant submitted that on 31.07.2018, to effectuate the sanction letter dated 19.07.2018, the Corporate Debtor provided a corporate guarantee for the loan to SVC Bank. According to the Appellant, UTWC defaulted on repayment on 01.06.2019, leading to UTWC being declared as a Non-Performing Asset (NPA) on 02.12.2019. The Appellant stated that SVC Bank issued a notice under Section 13(2) of the SARFAESI Act, 2002, demanding repayment of ₹29,89,96,940/-. Subsequently, on 27.02.2020, a Deed of Assignment was executed between SVC Bank and the Respondent No. 1 regarding financial assistance. It has been brough out that as per the Respondent No 1's Statement of Accounts dated 30.04.2021, the debt owed by the Corporate Debtor amounted to ₹35,90,56,629/-. 6. The Appellant submitted that on 18.05.2021, Respondent No. 1 filed Company Petition No. 529/MB/2021 under Section 7 of the Code against the Corporate Debtor which was admitted by the Adjudicating Authority and Mortar .....

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..... termination of the corporate debtor's default and does not constitute an exhaustive verification of all claims by financial creditors and submitted that the Interim Resolution Professional's failure to undertake or present any verification of the claims, particularly when the very existence of the alleged debt is under scrutiny before this Appellate Tribunal amounts to gross negligence. The Appellant alleged that IRP has taken steps towards expediting the liquidation of the corporate debtor without due diligence and further alleged that the conduct of the Resolution Professional in merely recording claims and notifying them as verified, without any supporting proof, coupled with the ongoing challenge to the veracity of the entire claim, demonstrates a mala fide intention to push the Corporate Debtor into liquidation. 12. The Appellant submitted that during the second meeting of the CoC on 13.06.2022, it was resolved that the Resolution Professional would present detailed Expression of Interest documents and FORM-G was published. However, at the time of this meeting, the claim amount submitted by NKGSB Co-operative Bank Limited was revised to Rs. 27,85,33,677/- on the grounds t .....

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..... ngful effort by the CoC toward reviving the Corporate Debtor and instead, the order has mechanically allowed the application and appointed a liquidator without considering whether the CoC had discharged its duty to explore resolution opportunities. 16. The Appellant further submitted that it is evident from the conduct of the CoC and the meetings held that no genuine efforts were made to explore viable revival options. The proceedings reveal a lack of commitment to the revival process, as demonstrated by the fact that the Resolution Professional, Shri Gajesh Labhchand Jain, who had already expressed his unwillingness to continue as Resolution Professional, remained in the role until the fourth CoC meeting where it was resolved to liquidate the Corporate Debtor. The Appellant submitted that the decision to liquidate a corporate debtor is a serious matter and cannot be treated as routine and necessitates adherence to all prescribed procedures and a thorough exploration of resolution possibilities before resorting to liquidation. 17. The Appellant submitted that Respondent No. 1 had filed certain additional documents before the Adjudicating Authority which should not have been allow .....

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..... vival of the Corporate Debtor. 24. The Respondent further submitted that as per Section 33(2) of the Code, if the resolution professional intimates a decision by not less than sixty-six percent of voting shares to liquidate, the Adjudicating Authority must pass a liquidation order. The Respondent No. 1 emphasised that in case where the corporate debtor has no assets, the CIRP must end and liquidation must start keeping in view the cardinal principle of value maximization. 25. The Respondent No. 1 submitted that Mr. Sandeep Goel was appointed as Liquidator to conduct the liquidation process of Shri Balaji Entertainments Private Limited as provided under Section 34(1) of the Code. 26. The Respondent No. 1 submitted that after considering all pleadings and evidence presented by both parties, Adjudicating Authority justifiably allowed the application for liquidation under Section 33 of the Code. 27. Concluding his arguments, the Respondent No.1 submitted that the Appeal is liable to be dismissed with cost. Findings 28. We have already noted facts of the case, background of CIRP and background for recommending the Liquidation of the Corporate Debtor, while recording the pleadings .....

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..... sions of Section 33 of the Code. It has been pleaded before us by the Respondent No. 1 that the Code lays down an established process flow for distressed companies, which entails a compulsory insolvency resolution process prior to liquidation. Thus, as per the settled law, on the hierarchy of processes, every company before its Liquidation/Dissolution pursuant to the Code, 2016, has to mandatorily undergo to the proceeding CIRP. However, there may be some unique cases wherein the CIRP, would not be purposeful, hence not warranted at all- a common example, being nil assets in the company. The Respondent No. 1 has argued that where the company has nil assets, there is practically nothing left to resolve and/ or realise. As a result, the odds of receiving a resolution plan during CIRP, or realization during liquidation seems certainly negative. Thus, a prima-facie stance was much in favour of liquidation and finally to dissolution of the Corporate Debtor. 30. We note that basically the liquidation of the Corporate Debtor has been challenged by the Appellant on the following grounds :- (I) The CoC had not taken full initiatives to resolve the Corporate Debtor which is against the sp .....

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..... I.A. No. 3150 of 2022 filed by the Respondent No. 2. (g) We will refer to Section 33 (2) of the Code, which provides that- "Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors [approved by not less than sixty-six per cent of the voting share] to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section ( 1 )[2]" ( Emphasis Supplied ) (h) Thus, Section 33(2) of the Code leaves hardly any choice to the Adjudicating Authority, once the CoC decide with the 66% voting rights to liquidate the Corporate Debtor. In the present case, the resolution to liquidate was passed by 100% votes in CoC. Hence, we do not find any error in the Impugned Order. (II) The Section 7 application was admitted on forged documents filed by the Respondent No. 1 and the conduct of the Resolution Professional is not good as it accepted the claims of the Financial Creditor without verification. (III) The additional doc .....

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